Taxation
10/03/2013
Assignments 11
30. (a), (b), (d) and (g) are capital assets. A gold ring, a personal automobile, shares of stock, and a home are not excluded from the definition of a capital asset. Accounts receivable, buildings, business cars and trucks, and copyrights are all excluded from the capital asset definition.
37. a. Ed has a net short-term capital loss of $750 ($1,500 − $2,250) and a net long-term capital gain of $3,000 ($5,500 − $2,500). The net capital gain is $2,250 ($3,000 − $750), which is taxed up to a maximum rate of 15/20 percent. b. There is a net amount of $750 included in Ed’s adjusted gross income. Ed has a net short-term capital gain of $1,500 ($6,000 − $4,500) and a net long-term capital loss of $750. The e net overall capital gain is $750 ($1,500 − $750), which is taxed as ordinary income up to a maximum rate of 35 percent. c. Ed has a net long-term capital gain of $4,500 ($8,500 − $4,000) and a net short-term capital gain of $750 ($3,000 − $2,250). The $4,500 is taxed up to a maximum rate of 15/20 percent, and the $750 is taxed as ordinary income. d. The e net amount deducted from Ed’s adjusted gross income is $1,400. Ed’s net long-term capital loss is $1,500 ($750 − $2,250) and his net short-term capital gain is $100 ($900 − $800). The net overall capital loss is $1,400 ($100 − $1,500), and Ed has a $1,400 deduction for adjusted gross income. e. Ed has a $3,000 deduction during 2013 and has a STCL carryover of $1,000 to 2014. Ed has a net long-term capital gain of $500 ($3,500 − $3,000) and a net short-term capital loss of $4,500 ($2,000 − $6,500). The net overall capital loss is $4,000 ($500 − $4,500). Ed has a $3,000 deduction in 2013, and the remaining $1,000 STCL is carried over to 2014. f. Ed has a $3,000 loss deduction during 2013 and a $3,000 LTCL carryover to 2014. The net long-term capital loss is $4,000 ($250 − $4,250) and the net short-term capital loss is $2,000 ($500 − $2,500). Of the $6,000 total capital loss, $3,000 is deductible in 2013 and $3,000 is carried over to 2014 as a LTCL carryover.
38. a. Ted has a Net LTCG of $14,000 and a Net STCL of $2,000 or a Net Capital gain of $12,000. b. The maximum rate at which the net capital gain would be taxed is 15 percent since Ted is in the 35 percent marginal tax bracket. c. The maximum rate at which the net capital gain would be taxed is 0 percent since Ted would be in the 15 percent marginal tax bracket.
51. a. $15,000 of Steven’s $25,000 gain is ordinary income since, within the last five years, net Section 1231 losses were $6,000 in 2008, $3,000 in 2009, $1,000 in 2010, $4,000 in 2011, and $1,000 in 2012. The remaining $10,000 is treated as long-term capital gain. b. All $12,000 is ordinary income and $2,000 of the 2011 loss and $1,000 of the 2012 loss can still be recaptured in future years.
55. a. Dan has a realized and recognized gain of $48,000. This is the difference between the selling price of $75,000 and the basis of $27,000 ($90,000 − $63,000 depreciation). All of the $48,000 recognized gain is recaptured as ordinary income since this was Section 1245 property and depreciation is recaptured as ordinary income to the extent of total depreciation taken, but not to exceed recognized gain. b. If $71,100 depreciation has been taken, the basis is $18,900 ($90,000 and $71,100) the recognized gain is $56,100 ($75,000 − $18,900) all of which is recaptured as ordinary income.
56. a. Emma has a realized and recognized gain of $58,400. This is the difference between the selling price of $80,000 and the basis of $21,600 ($72,000 − $50,400). There is $50,400 recaptured as ordinary income to the extent of total depreciation taken, and the remaining $8,000 is Section 1231 gain. b. If the property has been sold for $15,000, there is a realized and recognized loss of $6,600 ($15,000 − $21,600) and it is a Section 1231 loss. Recapture rules do not apply in a recognized loss situation. 